Friday, January 08, 2016

Engtex: Letting the warrant steal the show

Engtex-wa broke above its downtrend line this week at RM0.48 and rallied to a high of RM0.56 today. Its mother share, Engtex has also broken above its downtrend line at RM1.28. However, Engtex seems rather subdue.

In this situation, you can expect to see wither Engtex catching up with the warrant or the warrant correcting back. Given the current volatility in the market, it is a surprise to find the warrant marching higher. The buying of this riskier instrument is likely the work of insiders. It could be a prelude to an interesting development. Nonetheless, we must note that the warrant is trading at a small premium (only 5% currently as compare to only  2% last week).

With the bullish breakout of the downtrend and only a minimal price run-up, Engtex is a relatively safe trading BUY if you take the view that the dichotomy noted above will be resolved in favor of the mother share. Again, I wish to point out that you should exercise careful discretion in all trading given the current market volatility. Good luck!

Chart: Engtex-WA & Ebgtex's weekly chart as at Jan 7, 2016_9.00pm (Source: ShareInvestor) 

In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Engtex-wa & Engtex.

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